A Random Walk Down Penny Lane

They promise you the moon. They show you the moon all right.

For many investors, Wall Street can quickly become a boulevard of broken dreams. That's especially true for those poor unfortunates who fall for tips touting worthless penny stocks with hot stories but lukewarm follow-through. From time to time, the daily news can inspire a wistful trip down penny lane, where we remember some of the dreams that haven't worked out.

Shocking buybackReaders of this space (all four of you) will probably remember the tale of Law Enforcement Associates(AMEX:AID). This stock came roaring out of the blocks in early 2005, putting out a lot of press on its promised, me-too stun guns, ostensibly to capitalize on the public success that was TASER International(NASDAQ:TASR). Those with a sense of history and irony will note that this was exactly the time when TASER began to have major troubles, inflicting quite a shock on shareholders.

Still, there was, for a time, plenty of appetite for the "next TASER." The stock zoomed toward $10. The problem was, of course, that LEA's stun gun never really came along. Then insiders began flipping out of their shares, the Director (who was also a major shareholder) was nailed by the Feds, restatements ensued, the CFO quit -- "for personal reasons," naturally -- and now the stock sits under a buck a share.

But never fear! LEA has announced a share buyback. Remarks attributed to LEA President Paul Feldman said, ". Our board believes our common stock is undervalued at current levels."

Surely this means aid for the outside shareholder? Hardly.

Read the details and you'll see that LEA is looking to purchase a measly $100,000 worth of stock. That barely covers what major holders have sold in the past few months, and it doesn't come close to making up for the dumping over the past couple of years. The 110,000 shares that could be purchased at today's prices would come to 0.4% of the shares outstanding.

Obviously, this will do nothing to enhance shareholder value. So why do it? A skeptic might suggest it's just a PR ploy to try to keep the share price above a buck so it doesn't head down to the minor leagues from the Amex stock exchange.

When pigs flySpeaking of buck-a-stub stocks, probably the best thing I can say about GlobeTel(AMEX:GTE) is that its business plan makes LEA's look utterly rational and stable by comparison. If entire businesses could be diagnosed with ADD, GlobeTel would be on the way to the pharmacy for some Ritalin.

It's been touting its money-losing VoiP services for years, but it burst out of pennyland in early 2005 with a goofy-sounding plan to float WiMax blimps and deliver everything from voice, data, and television to users from these platforms.

Of course, GlobeTel's blimp story was, for a few frantic months, bumped off the front page by the $600 million Russian WiMax deal it claimed to have, a deal that would catapult it past huge and established equipment and service providers such as Motorola(NYSE:MOT), Nokia(NYSE:NOK), VimpelCommunications(NYSE:VIP), and MobileTelesystems(NYSE:MBT).

It made zero sense to me, of course, but my questions were met with a high degree of animosity from GlobeTel management. Delay after delay ensued. Excuses were offered. Then, of course, the deal failed utterly.

So, it was back to the blimp story. There was only one, teensy problem, of course: It still doesn't have a blimp that can do what it claims -- at least by the standards of folks who would say it's one thing to build something in a hangar and let it float, and quite another to see the thing fly 13 miles up, transmit, hover for months at a time, pilot itself automatically, power itself with rechargeable solar systems, and do all the other great things GlobeTel management promises it will do.

Moreover, it's a long way from ever getting this done, and it's woefully behind the original schedules for the most preliminary flight testing of the scaled-down model. I don't think it'll ever get one working, though I expect that it might be able to cobble together a demonstrator that will float around long enough to generate some buzz.

But even that is on hold, as GlobeTel released a statement late yesterday afternoon explaining, surprise surprise, that "flight" testing of the latest blimp model would be late because of problems with some carbon-fiber "tacos." (No, you can't make this stuff up.)

Sounds a lot like the endless, seemingly reasonable delays that preceded the flop WiMax deal to me, although GlobeTel apologists will likely be reassured. As the excuses keep coming, with trading halted this morning pending the release of material news, investors would do well to keep ignoring this hot stock tip.

Seth Jayson is always rummaging through the junk pile to see what's interesting. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here.Fool rules are here.